USPS Finalizes Rule That Could Lead to Fraudulent Fundraising

WASHINGTON (AFP eWire - Oct. 10, 2003) - The United States Postal Service (USPS) has issued its final regulations to essentially eliminate the Cooperative Mailing Rules. The regulations, which were published in the Oct. 9 Federal Register, will take effect on Nov. 13.

The disappointing decision opens the door for unscrupulous for-profit fundraisers with dollar signs in their eyes to enter into one-sided agreements with nonprofits or even create their own charities to use in their mailings while keeping the donations for themselves. Too often, these lopsided relationships result in 90 percent or more of the funds raised going to the for-profit, while the charity receives the scant remainder.

In addition, Americans could see large increases in the amount of nonprofit mail they receive, further increasing the difficulties that legitimate charities face in raising funds.

'We are very concerned about the impact this decision will have on legitimate charities and public trust concerning charities,' said AFP President and CEO Paulette V. Maehara, CFRE, CAE. 'Small and start-up nonprofits should have options in dealing with for-profit fundraising consultants, but there should also be safeguards to help shield them from unscrupulous, fly-by-night operators. Unfortunately, this ruling eliminates those safeguards.'

The cooperative mailing rules stipulate what type of mail is eligible for lower, nonprofit mailing rates depending on the relationship between the charity and the for-profit entity.

The USPS rejected most of the conditions suggested by organizations that were concerned that the elimination of the rules would lead to abuse of the nonprofit mail rates. AFP had joined with the Alliance of Nonprofit Mailers and other organizations in developing an alternative proposal that would have kept some criteria while expanding options for nonprofit organizations.

The USPS did add one condition to the final rule, requiring for-profit fundraisers to provide nonprofits with a list of donors, contact information and the amount of donations. Nonprofits can waive this requirement if it is done in writing.

Maehara added that she did not feel this requirement would help charities much at all.

'It says nothing about who owns the list, and fraudulent fundraisers who create their own shell charities won't be worried about it in the slightest,' she said. 'Our alternative proposal provided a good middle ground, and it's very unfortunate it was rejected by the Postal Service.'

The Postal Service said it received 67 comments on the rule, with the majority urging the rule's adoption as proposed. A small number of comments were concerned about abuses of the rule, and the Postal Service's Consumer Advocate plans to monitor for abuse of the rule.